Down with the evil Gas lords II: Kaak's Revenge!

[Imran Siddiqui]

I don't care what cost their trying to recover.

Yes, and I'm sure you won't care when all the refineries close down if they can't recover any costs. Why do you think people are in business in the first place?

[Kidlicious]

Originally posted by Imran Siddiqui

I don't care what cost their trying to recover.

Yes, and I'm sure you won't care when all the refineries close down if they can't recover any costs. Why do you think people are in business in the first place?

They are recovering costs. They're just doing it at a rate that only a firm with monopolistic power can.

edit: I meant to say that they would still recover those costs if they charged the same amount that they would have to if the market was competitive.

[Imran Siddiqui]

Originally posted by Kidicious
They are recovering costs. They're just doing it at a rate that only a firm with monopolistic power can.

What? 5% rate of return is too much for you?

I make more in my 401k, ffs!

[Flubber]

Originally posted by Kidicious


Why should consumers be expected to give them return on the're investment. We're talking about what a fair price is today. I don't care what cost their trying to recover. I'd like to recover some costs that I've had over the years too, but am I going to get paid more for my work because I have those costs? Hell no. Those costs have nothing to do with what I will get paid. That's because I have no monopoly power to make an empolyer pay for those things for me. The refining producers have that power. That doesn't mean that we should have to pay for those investments.

This post embodies everything that I find unrealistic in your posts.

1. If they are exercizing monopolistic powers, WHY oh WHY pray tell would they not be setting prices that would give them profit levels higher than John Smith gets in running a Quickkie-Mart ??

2. If consumers won't care what goes into a price why are we talking about the profit levels of oil and refining comapnies at all? If you don't care if they make adequate profit, then why would you care if they made 1000%. Yet people get all besides themselves if profits are seen as too high. So is it your argument that profitability is irrelevant?

3. Oh and in an employment context you SHOULD get paid more for those costs. If people do not get paid more for having certain needed skills or training, then its likely that not enough people will get them. With refineries, we are seeing bottlenecks and shortages of capacity PRECISELY because sufficient profitability has not been present to have someone to take the risk to build new refineries.

[Kidlicious]

Originally posted by Imran Siddiqui


What? 5% rate of return is too much for you?

I make more in my 401k, ffs!

You both get too much.

[Flubber]

Originally posted by Kidicious


They are recovering costs. They're just doing it at a rate that only a firm with monopolistic power can.

edit: I meant to say that they would still recover those costs if they charged the same amount that they would have to if the market was competitive.

HUh-- how much less of a profit level would you expect they would receive in a "competitive" environment??

[Kidlicious]

Originally posted by Flubber


This post embodies everything that I find unrealistic in your posts.

1. If they are exercizing monopolistic powers, WHY oh WHY pray tell would they not be setting prices that would give them profit levels higher than John Smith gets in running a Quickkie-Mart ??

Do you know what it means to have monopolistic power? It means you can charge more than you would be able to in a more competitive situation. They are making more profit than the guy at quickit-mart. Their profit margins are much bigger. You are associating monopolistic power with ROR, and they aren't associated that way. ROR is a long run concept, and monopoly power/competition is a static concept.

2. If consumers won't care what goes into a price why are we talking about the profit levels of oil and refining comapnies at all? If you don't care if they make adequate profit, then why would you care if they made 1000%. Yet people get all besides themselves if profits are seen as too high. So is it your argument that profitability is irrelevant?

ROR is irrelevant to fairness according to neo-classical theory that states that a fair price is one that is the price under competitive situations only. Monopoly prices are not fair.

3. Oh and in an employment context you SHOULD get paid more for those costs. If people do not get paid more for having certain needed skills or training, then its likely that not enough people will get them. With refineries, we are seeing bottlenecks and shortages of capacity PRECISELY because sufficient profitability has not been present to have someone to take the risk to build new refineries.

Bull****. Capacity decisions are made with respect to future profitability, not present. Anyone who is basing their decision on current profitability is just as stupid as those people who over invested in the past.

[Kidlicious]

Originally posted by Flubber



HUh-- how much less of a profit level would you expect they would receive in a "competitive" environment??

Why do you have 'competitive environment' in quotes here? I don't know how much. Theoretically their current profit margins would be the same as those of the firms in other industries. I think their profit margins are much larger than that now.

[Zkribbler]

I find KrazyHorses's chart above very troubling.

Does anyone know why the number of U.S. refineries has decreased 50% in the last 25 years?

Indeed, even overall production has decreased even though we're using more and more gasoline.

[Imran Siddiqui]

Originally posted by Zkribbler
I find KrazyHorses's chart above very troubling.

Does anyone know why the number of U.S. refineries has decreased 50% in the last 25 years?

Indeed, even overall production has decreased even though we're using more and more gasoline.

Flubber has identified a main one, the rate of return on a refinery is piss poor (some of it probably because of the more stringent requirements on refineries). If you were trying to get investors, they could make more money on your average mutual fund. With that staring you in the face, why invest in more refineries?

[Kidlicious]

Well, if they don't build anymore refineries their profit margins are going to remain the same. If they build some their profit margins will become lower. That doesn't mean they have to go whole hog and over expand like they did before.

[Flubber]

Originally posted by Kidicious


Why do you have 'competitive environment' in quotes here? .

Because I have not seen any compelling argument that the refineries now, owned by various diverse business interests do not compete

Originally posted by Kidicious


. Theoretically their current profit margins would be the same as those of the firms in other industries. I think their profit margins are much larger than that now.

Do you have a cite for that belief. In the last thread I cited the American Petroleum Institute (YES an industry source) with the average of a 5% rate of return since 1990. With that return I can't see the damage being done even if we accept your premise ( which I don't) that there is a monopoly currently

[Kidlicious]

Originally posted by Flubber


Because I have not seen any compelling argument that the refineries now, owned by various diverse business interests do not compete



Do you have a cite for that belief. In the last thread I cited the American Petroleum Institute (YES an industry source) with the average of a 5% rate of return since 1990. With that return I can't see the damage being done even if we accept your premise ( which I don't) that there is a monopoly currently

You have blinders on. Anyone can see that they have monopoly power by looking at the way they are able to price their product. Competitive prices don't act like that. You don't see profit margins and prices that stay high for long periods of time.

[KrazyHorse]

5% rate of return on capital investments is a monopolistic rate?



You can get a term deposit with 5% nowadays

[KrazyHorse]

PRICES AREN'T HIGH

That's what we've been saying. The rate of return is insufficient to even justify the initial outlay.